Bars, pubs and restaurant chains are pulling back on expansion and may close outlets amid big rises in food and drink costs.

Food price inflation for licensed businesses is running at 9% according to the Association of Licensed Multiple Retailers, while drink costs are rising by up to 7%, partly as a result of the fall in the value of the pound since last year’s Brexit vote.

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Kate Nicholls, the chief executive of the ALMR, which represents 90% of restaurants, pubs and bars, said the businesses were coming under pressure as only 4% felt they could pass on cost increases to their customers through higher prices.

“There is a real reluctance to increase prices to the consumer for fear of damaging fragile discretionary spend,” Nicholls told the Food and Drink Federation convention at the British Museum in London.

“There is a risk that additional costs could hit at a time of great instability hitting eating and drinking out businesses that are crucial to the UK economy and have helped restore prosperity to our town and city centres.”

Concerns about rising costs combined with a drop in drinking and dining out have led to plummeting business confidence. Before the Brexit vote 84% of ALMR’s members were optimistic about their own businesses, a figure that has fallen to 47% . “Uncertainty is the new norm,” Nicholls said. “We are starting to see people go bust. There is a very febrile atmosphere at the moment.”

However, there was also a positive note with nightclubs experiencing 3.6% sales growth after a period of decline, according to the ALMR Christie & Co benchmarking report released on Tuesday.

Nicholls said businesses had to increase sales at existing outlets by 5% to 6% a year just to cope with increasing costs and so were increasingly under pressure. Two-thirds of ALMR’s members had already been adversely affected by the fall in the value of sterling. Nearly 30% more said they expected adverse affects this year.

She said uncertainty about the future as the UK negotiates its exit from the EU was making it difficult for the many chains backed by foreign private equity money to plan ahead.

Availability of labour is a particular concern. About half of the hospitality industry’s workforce comes from overseas and more than a quarter are non-UK EU nationals. The balance varies by role, with 42% of chefs from overseas compared with 35% of restaurant managers, 29% of waiters and 13% of bar staff.

In London and the south-east, 70-80% of hospitality workers come from overseas. Nicholls said that with nearly full employment, this was “not a skills shortage, it’s a labour shortage” and government needed to give confidence about future access to workers.

She said it would take three to 10 years for businesses to adapt if access to EU workers was cut off after Brexit.